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Company: Mindray Medical International (MR)
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  Strong operating leverage

Mindray Medical International Limited (MR) reported earnings earlier this month and the news was encouraging. After a tumultuous decline late in the first quarter, the stock had begun to rebound, and then moved decidedly higher on the announcement. Revenue came in at $89.3 million which was good for a 48.2% increase. More importantly, the company’s international revenue (outside its home country of China) was $45.6 million or 49.4% higher. Since management has continued to reaffirm its commitment to growing outside its primary China market, it was encouraging to see international sales make up more than half of total revenue. The company continues to enjoy a healthy 57% gross margin and net income came in at $28.4 million or 25 cents per share. Management noted its pride in the fact that the bottom line is actually growing more quickly than the revenue numbers, indicating strong operating leverage.

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  Acquisition boosting world market share

One of the most exciting events in the first quarter was an agreement to buy Datascope Corporation’s patient monitoring business. Mindray picked up the line for $202 million and expects to leverage the products over its current infrastructure. Management has stated that they expect $30 million in synergies by 2011 and has noted that there has been no Datascope staff turnover in the sales department or the R&D portion of the business. An Oppenheimer analyst noted that the acquisition should increase the company’s worldwide market share to 9%, add an additional 20 FDA approved products, and enable cross selling between the two company’s US and China customers. While the growth rate of the new division is much lower than that of its new parent company, it appears that Mindray has the talent in place to jump start the business to perform more in line with the rest of the company.

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